The inner sanctus of trade, stopping unfair practices

Business nowadays is no different than what it was before, except that it is now so widespread and is such a powerful force. And what lies at the heart of business? Trade.

Mainstream economics teaches that the more a country trades, in particular, exports, the greater the well-being of its people should be. Even by some very traditional measures, e.g. economic growth, this is very far from always being true.
Russia in 1997 rapidly exported most of its commodities like oil, but its economy only grew by 0.4 percent. Wages fell by almost half in that year, after seven years during which inequality had doubled and life expectancy declined by more than four years.

And as in other countries, the wealth of trade disappeared into the pockets of the elite (much of it criminal) that is plugged into the circuits of economic globalization.

Globalization is supported by three pillars. First, the working of business and trade across boundaries. Second, the trans-national and multi-national corporations. Third, the underlying ideology — consumerism. Hence the term “free” (whether put before “trade” or “business”) gets its legitimacy regardless of whether it would be practiced fairly or otherwise.

OXFAM last year reported that developing countries with lowest incomes made up more than 40 percent of the world’s population, but only had access to 3 percent of the world’s market. The rich countries export goods and services valued at US$6,000 per capita, while that value in developing countries is only $330 and in low-income countries only $100.

Even though the history of business — mainly the history of trade — is mostly that of inequality, their proponents keep persuading us to worship the only mode of trade: Free trade, as this is very much in line with the spirit of neo-liberal economics which believes in two basic ideas. One, that all humans are homo economicus, that the economic motive is the only one which drives humans. And, two, that to seek and accumulate profit, financial capital must be separated from the survival process of a community.

This is consistent with the logic of the current practice of free trade; it attempts to be released from rules that take into account production location, capital sources, environmental concerns, technology, public participation, etc.

It roams from country to country with few restrictions in its search for the lowest wages, the loosest environmental regulations, the most docile workers. The result is the destruction of livelihoods, cultures and the global environment.

By 1997, the income gap between the richest 20 percent and the poorest 20 percent of the world was 74:1 according to studies of globalization. One-fifth of the world’s people living in high-income countries produced 86 percent of the world’s gross domestic product (GDP), whereas the one-fifth in poor countries only produced 1 percent.

The average income of a person in one of the richest 20 countries is 37 times more than a person living in one of the 20 poorest. This ratio has doubled over the past 40 years, mainly because of a lack of growth in the poorest countries, according to last year’s data from the United Nations Development Program (UNDP).

In addition to the very low wages and an “instant gratification” life-style, the environment suffers as a result of the survival of the economically fittest, the orthodox economists would say. But the free traders interpret “fit” as “the marketable”, “the profitable”, “the global” and “the growth”.

It is the perversion of Darwin’s survival theory which is pathetically inadequate since only the “financially fit” will survive. Those that do not fit — people, communities, nations and environment — are bled dry.

Theodore Levitt (1958) and Milton Friedman (1962) were probably correct when noting that the main and only responsibility of business — and therefore trade — is to accumulate profit. Thus it is the dynamics of trade transactions which may at their whim choose to nurture or strangle us.

Today, free trade is evidently a destructive machine that can bear no variation and it will not build the kind of world most of us want. Thus, it is now the time to say “stop” free trade and start to go beyond it — to trading that is fair.

Firstly and mainly, although business is all about “buying and selling” — it is also about a different kind of bottom line. The bottom line of trade is not necessarily always just profit. It means we have the option to put some heart into the economy.
We need not leave morality or ethics at home when conducting business. We should not have to leave behind the understanding, sympathy, humanity or fun that is essential for business, just as it is essential for life.

Secondly, it is impossible to detach economic orthodoxy from the current character of wealth, power and self-interest. We can then understand why fair-trade is now desperately needed.

The power of global trade must be democratized for the sake of our shared life. This shows that the market system in which trade is involved is a system of power and, of course, one that has become very real in the political economy structure.

But “market” simply means an exchange mechanism, barter or monetary. A “market system” is quite different — it is a mechanism for sustaining and reproducing an entire society based on the logic of profit and loss.

The essence of the fair trade movement is about promoting agency, reasserting human control over a system and mechanism that claims to be in the best interests of everyone but no longer even bothers to prove it.

The very idea of fair-trade movements is the democratization of business practices which have a hold on the trade system and the control of capital flow. Fair trade must no longer entail a belief in the “magic of the marketplace” in this world captured by economic power. It has to be very critical since the workings of the market are manipulated by capital and its interests.

Nevertheless, although the fair trade movement has been going on for the past four decades, it is still too small compared to overall global free-trade. Of $3.6 trillion of all goods exchanged globally, fair trade accounts for only 0.01 percent.

So, as we celebrate World Fair Trade Day, it is worth rethinking the battle. Yet, it is not a battle between the community and the market; rather, it is between a bottom line that includes communities, ethics and the environment and one that sees nothing but profit. Unfortunately the battle is still imbalanced — like an infant trying to survive among the giants.

The writer is the Executive Director of the Business Watch Indonesia, lectures at the Sahid University in Surakarta and is a researcher at Uni Sosial Demokrat, Jakarta.